Welcome to EconomistMom.com and my premiere post! Please visit my “About…” and “Special Thanks” pages (linked at the top bar) to see how this blog was born. I hope you will bookmark this site and visit and comment often!

This morning (Mother’s Day) the Seattle Post-Intelligencer published my “guest column” announcing this blog. Special thanks to Seattle P-I Editor Mark Trahant for making this possible, and for his general commitment to the issue of fiscal responsibility. Here it is:

The day after our au pair had been committed to a psychiatric facility, I walked into my staff director’s office and told him I had to leave Capitol Hill. The two months of living with a person falling into mental illness had served as an exhausting yet startling wake-up call that forced my family to re-evaluate both our child care needs and our budget. For 14 years, we had been on autopilot — each year renewing our contract with the au pair agency, finding our next au pair and paying for full-time care. With the oldest of our four kids now 16, circumstances and common sense told us it just wasn’t worth it anymore.

It was a wake-up call for my professional life as well. I had to leave the Hill, but I wanted to continue working on the policy issues I’d focused on throughout my career — the economics of government budgetary policy and more specifically, the wisdom of fiscal discipline. In that respect, my chief economist position at the House Budget Committee had been an ideal fit. But I had been disappointed in how difficult it proved to sell the members of Congress on “doing the right (fiscal) thing.” Although fiscal responsibility appeals to common sense, many policymakers feel it lacks political sense.

A couple years ago, I worked at The Brookings Institution and participated in The Concord Coalition’s Fiscal Wake-Up Tour, traveling across the country to advocate for fiscal responsibility, with then Comptroller General David Walker, Concord’s Bob Bixby and other scholars from Brookings and The Heritage Foundation. The tour has been going on for nearly three years now. Cynics can point to continued budget deficits, but the tour is making a difference exactly where it was intended — from the ground up — and the public is now more supportive of politicians who do the right (fiscal) thing than the politicians themselves yet realize.

So, faced with my own personal and professional wake-up calls, I accepted an invitation from The Concord Coalition to join its staff as chief economist and reunite with the Fiscal Wake-Up Tour. Related to my official duties on my new job, today I launch a blog using my dual credentials as a Ph.D. economist and a mom. EconomistMom.comis a place where analytical rigor meets a mother’s intuition.

EconomistMom.com will discuss a wide variety of issues from this dual perspective, with fiscal responsibility figuring prominently. Here’s a sample of some fiscal policy lessons that emerge from the EconomistMom.com perspective:

There is no such thing as a free tax cut (or spending program). A theory known as the “Laffer Curve” says that if marginal tax rates are high enough, a cut in tax rates could actually produce higher revenues. The problem is that we’re nowhere near the level of tax rates that put us on this portion of the theoretical curve. For federal budget policymakers to count on tax cuts paying for themselves because there’s some very tiny probability it could happen is like my counting on my son’s dream of becoming an NBA basketball player coming true — and deciding there’s no need to save for his college education or for my retirement!

Deficit-financed tax cuts or spending today promise many-fold tax increases on our children. Deficit financing is a cost-maximizing budget strategy — because of the curse of compound interest. The choice is simple: Pay for it now, or our kids pay even more for it later. For example, the balance on a $1,000 loan swells to more than $3,000 when repayment is put off for 20 years, even under a relatively low interest rate of 6 percent. If as parents we aren’t willing to go on a personal spending spree, run up our credit card balances and leave the bills for our kids to pay, why should we put up with (or even clamor for) deficit-financed tax cuts and programs?

Lack of fiscal discipline is costly beyond the costs of debt service, because it undermines the need to set priorities. With budget rules easily bypassed, the federal government’s fiscal policy decisions are often made as if there are no constraints. This is akin to my family being turned loose in a shopping mall and told we can keep whatever we can grab in five minutes. How much would we think about the usefulness or desirability of what we were putting in our cart? More tragic, how would we feel if we were later handed the bill? Acting “economically” (and responsibly) means understanding and working within our constraints to make thoughtful decisions, so that we end up choosing the things that provide us the greatest net benefits, rather than the things we saw first at the store.

To adequately consider those fiscal priorities, policymakers need to take the government budget off “autopilot.” Just like my family had to take our spending off autopilot and reevaluate our needs and our means as our circumstances changed, so will the government in order to handle the challenges associated with the aging of the baby boomers.

If the federal government is going to turn around the fiscal train before it wrecks, it will need to start to budget more like responsible parents do — heeding the basic math, using common sense and being good stewards. EconomistMom.com will promote this way of thinking, and it’s my Mother’s Day wish that such “waking up” will be contagious.

Diane Lim Rogers (”EconomistMom”) is a mother of four and the first chief economist of The Concord Coalition, a nonpartisan, grassroots organization advocating generationally responsible fiscal policy. From January 2007 to April 2008 she served as chief economist for the House Budget Committee.

‘There is no such thing as a free tax cut (or spending program). A theory known as the “Laffer Curve” says that if marginal tax rates are high enough, a cut in tax rates could actually produce higher revenues. The problem is that we’re nowhere near the level of tax rates that put us on this portion of the theoretical curve.’

Passing good laws do not require cash to flow from special interests to politicians, but bad laws do. The same with tax breaks. I’d sure be a lot more comfortable if cash were not flowing from the fat cats when these tax cuts were given or other spending measures are voted on. Had they passed on their own, it would have been different than when the hands were greased.

In fact, we need full public funding of campaigns. If politicians are to be beholden to their funders, I’d rather the money come from the taxpayers. Just $10 per taxpayer per year would fund all congressional elections and would eliminate the $3000 per taxpayer we now spend to fund the giveaways to the interests that now fun the elections. Then we’d see balanced budgets virtually overnight and tax cuts would be automatic.

Thank you for sharing your refreshing thoughts on economic behavior. I learned of your website while reading today’s Seattle Times. I’ve bookmarked your site and look forward more beneficial reading/learning as I rollercoaster along in my journey to a better understanding of today’s economic influences.

Congrats on the new blog and welcome to the CC. Poking and prodding here and there at 65,000 pages of tax code is just going nowhere fast. The Fair Tax is America’s very best answer to this persistent problem. We the people need to see our taxes in front of our noses, at every purchase, in broad daylight, not unlisted and hidden in the dark depths of gasoline prices, food prices, import costs, salaries, and forwarded corporate costs. The simpler the tax the easier it is for everyone to understand. The Fair Tax accomplishes these goals and so much more. Please read the Fair Tax books and see what the end of the IRS would mean for every American. American congressional fiscal responsibility is the goal, Fair Tax is the path that takes all of us there.

Hi and Congrats on the new blog. I found out about it from the Seattle PI and am interested in how it progresses. I just hope it doesn’t get too far over my head.

One current topic that I would like you to address is the specific proposals to provide a gas tax break over the summer. Is this a fiscally valuable thing to do, or is it just a popular, but flawed approach to lowering the gas for the summer travelers?

My big complaint about those in office is that they don’t seem to care what happens to our country as a result of their fiscal negligence. I can’t believe they have no idea that their fiscal irrespopnsibilty is bad for this country.

None of them show any real concern that their failure to exercise fiscal discipline shows their disdain for the welfare of this nation. If they had any sense of duty to this country they would make it their business to get nation’s fiscal house in order.

Instead they have walked away from this responsibility and are mostly satisifed with letting our nation steadily decline. What a sad commentary for people who are charged with overseeing the fiscal affairs of this nation and keeping our nation on a strong fiscal footing.

There’s simply no excuse for their failure to live up to their fundamental responsibility as fiscal stewards of this nation. I try hard not to give in to cynicism, but I see no evidence whatsoever that anyone in Washington is even remotely serious about doing what it takes to address this issue in earnest.

If Ms. Rogers really wants to get something accomplished in this area, she needs to take those in office to task for every thing they do that fails fiscal muster in terms of living within our means. Mild criticism will not get the job done. Unless their shameless abandonment of our nation’s fiscal well being is brought to light, nothing will change.

Deficit financing is a cost-maximizing budget strategy — because of the curse of compound interest. The choice is simple: Pay for it now, or our kids pay even more for it later. For example, the balance on a $1,000 loan swells to more than $3,000 when repayment is put off for 20 years, even under a relatively low interest rate of 6 percent.

I realize you are trying to dumb things down for the average reader, but the above seems like a fallacy that economists could easily spot. Do you think only suckers take out 30-year mortgages, rather than shorter ones? After all, the shorter ones are “cheaper.”

How about adding this to comment 11? Let us start trying to educate our high school children so that the “dumb things down” approach will be unnecessary when they begin their economic experiences as adults.

I am interested in hearing thoughts on encouraging Americans to pursue higher education, ways to reduce our heath care costs, and increase the transparency of taxes.

I was a McCain supporter… until he seemed to change his mind on eliminating the estate tax and espoused the gas-tax holiday. (My first vote for President was John Anderson)

I had my personal and professional wake-up call about eight years ago when I changed my life to focus on my kids. I’m a single dad with sole custody of my three kids and the caregiver for my parents. I’ve gained a great new perspective on life.

Congratulations on your blog; there are many of us out here that will keep you fired up.

Greetings! Thank you for posting your blog. I traded email with you in Nov 2006. I had listened to the PI ’s podcast of the wake up tour and was interested in assisting in some way. I found the email I’d sent on Nov 30, 2006 and wanted to repost it here, maybe some of these ideas will be helpful. My comments about market contagion unfortunately have come true in recent months as we look at the melt-down in the housing market and the way hedge funds have in some cases fallen to pieces over night.

Here’s my letter from Nov 2006

First, I am reminded of a person falling from the top of a 100 story skyscraper. Someone shouted to him at floor 40, how are you, and he said “so far so good.” This is what our country seems to be like when we look at the rosiest set of books.

I am also reminded of a mafia scene, where you don’t want to be in debt to a mobster who in turn wants to move you out for their own purposes. Owing trillions to China is really serious. Yes they need us as a market, so they won’t cut off the debt. However, we’ve seen many times in Chinese history when their political needs have trumped economic considerations. Very sobering.

In the talk, you mentioned four deficits.. I would add a fifth: the environment. Just a few days ago, there was an announcement about a $50 Million “save Puget Sound Whales” program. The total that’s been tossed about is $12 Billion for a complete Puget Sound restoration. Another example is the drawing down of the aquifer in the US Great Plains that supplies much of the water for agriculture in that region. Puget Sound and the aquifer are assets. We’re using them up. That to me is a deficit, because ultimately it is not sustainable and costs a lot of money to fix.

Your talk attempted to answer the question of “what do we do.” You talked about elected’s behavior, and the challenges of DC. Someone asked a question about historical debt levels. I recall hearing some countries in Europe, like Belgium and Italy, are much worse off when it comes to unfunded liabilities per person. Of perhaps greater interest are historical examples from classical times of democracies that basically imploded because they overspent. We should be looking at these cases, or at some of the Latin America countries from the 1950s to present. I think you’re right that there’s no inalienable right of the US Dollar to be the reserve currency of the world.

I would like to close with some comments about the media, infrastructure projects, government spending in general, and earmarks specifically.

I recall a comment several years ago from Sen Patty Murray. She said something along the lines of “I will lobby for earmarks and spending for Washington State, because if we didn’t get it, it would go to New Jersey instead.” Recently she said “I’m here to be your representative and present local needs in a way DC bureaucrats can’t understand.” These are paraphrases, but to me, they illustrate several problems:

We tend to think of spending as a distribution, “either us or NJ.” Problem: in DC, usually it is BOTH us AND NJ. You identified the need for spending controls. This “both / and” is why we desperately need them.
We tend to think of only the dollar amount, not the total including interest. Patty can brag “I secured $?? Million for the sculpture park a few blocks from the PI where you met, I secured $?? Million for a redevelopment project in Burien, I got $750 Million for light rail, I got millions for an airport, blah blah blah.” These figures don’t include interest. They don’t include the total cost of ownership, for example, the costs of running the trains, maintenance on the tunnel, etc. Also, there’s never a counter of “that’s nice, what about the deficit” when someone brags about this.
We the people are making the exact same mistakes. We tend to think of analogies. To many people, your comments about spending are sort of like running a credit card balance. It just sort of happens, and people don’t think about it very much. Grasping a big problem of unfunded liabilities in the trillions is very hard to grasp when people don’t see a problem at their own level.

As I mentioned, I have an MBA from Wharton. One of my most interesting classes was “theory and structure of financial markets.” We talked about systemic issues of market contagion, where suddenly everyone has the same opinion and radically changes behavior. It is very hard to know what the tipping point is for these type of major market moves until they happen. No one ever likes to hear “the emperor has no clothes”. I think you for your stand and for bringing these issues to a wider audience.

I would have the following suggestions for you:

You need to create a web site that makes these numbers easy to understand.
It should be interactive
It should have historical examples
It should have build on personal examples: “what would happen if a family had zero retirement? What if everyone had zero retirement?”
You need to lobby the media to report the total cost of spending, including interest and ongoing operations / maintenance
You need to create materials that can be used in schools and universities
You or someone need to have media messages about the importance of saving. We get bombarded with “spend spend spend.” We hear things like “consumer spending is strong. The economy depends on the consumer. If people don’t spend a lot at Christmas there will be big problems” .
These messages are hard to rebut. Fortunately I have the memory of my grandmother talking about what it was like to be widowed in 1936 with just a $25 per month life insurance policy to help her (as well as her mother nearby who could watch my mother, then a two year old, while my grandmother went back to work). A web site should have stories along these lines, talking about the difference saving has made in people’s lives.

Just found this site via angry bear. I think what you’re doing is fabulous (despite the above commenter’s apparent anger). I haven’t had a chance to read much yet, but I’m looking forward to seeing more.

I’m hitting similar issues in my less trained, but equally wonky way. I’m also one of the contributors for Momocrats (www.momocrats.typepad.com), one of the accredited blogs at the DNC this year. I hope you’ll check us out.